John Billig+allied Sterling Plc For Judicial Review Of A Decision Of The Council Of The Law Society Of Scotland Made Under Section 43 Of The Solicitors (scotland)
| Jurisdiction | Scotland |
| Judge | J. Gordon Reid, Q.C. |
| Neutral Citation | [2006] CSOH 148 |
| Date | 20 September 2006 |
| Docket Number | P1788/04 |
| Court | Court of Session |
| Published date | 20 September 2006 |
| OUTER HOUSE, COURT OF SESSION [2006] CSOH 148 | |
| P1788/04 | OPINION OF J GORDON REID Q.C. F.C.I.Arb Sitting as a Temporary Judge in the Petition of (FIRST) JOHN BILLIG (SECOND) ALLIED STERLING PLC Petitioners; for Judicial Review of a decision of the Council of the Law Society of Scotland made under section 43 of the Solicitors (Scotland) Act 1980 ________________ |
Petitioners: Dean of Faculty, Wolffe; Simpson & Marwick
Alt: Johnston Q.C., Munro; Brodies
20 September 2006
Introduction
[1] This Petition for Judicial Review relates to a decision by the Council of the Law Society of Scotland (the "Council") dated 30 April 2004. The Council has refused to make a grant out of the Scottish Solicitors Guarantee Fund in favour of the Petitioners who suffered loss through the dishonesty of a solicitor, Michael Mullen, who was, at the material time, enrolled on the Register of Solicitors in Scotland. The losses concern certain loan transactions and the granting of letters of undertaking by Mr Mullen whereby he irrevocably and unconditionally undertook personally to repay the loans being made to his client.
[2] At the First Hearing, which took place on 4, 5, 6 and 13 July 2006, the Petitioners sought inter alia decrees of declarator and reduction of the Council's decision, and the Respondents, the Council, sought dismissal. The issues debated before me raised questions about the administration of the Scottish Solicitors Guarantee Fund (the "Guarantee Fund") currently established by section 43 of the Solicitors (Scotland) Act 1980 (the "1980 Act"). There is a lengthy history to these claims. The background leading up to the decision under challenge is well documented and is not seriously in dispute. Although there are two petitioners, counsel did not draw any distinction between them in their submissions, and I have not done so.
[3] The issues debated before me largely concerned the question (which can be expressed in a variety of ways) whether there was material before the Council entitling them to make a finding of negligence on the part of the Petitioners, and if there was not, whether the Council had a general or residual statutory discretion to refuse to make a grant, and whether the proceedings therefore fell to be remitted to the Council to consider the exercise of any such statutory discretion. Other related questions were also debated and fall to be determined.
[4] Finally, by way of introduction, I record that the petitioners tendered a short Minute of Amendment which substituted declaratory craves for branches (3) and (4) of Article 3 of the Statement of Facts. The amendment was not opposed and I allowed it.
Statutory Background
[5] A compensation fund was established in England and Wales by the Solicitors Act 1941 for the purpose of relieving or mitigating losses sustained by any person in consequence of dishonesty on the part of any solicitor. Section 2 of that Act provided inter alia that
"(1) A fund to be called "the Compensation Fund" shall be established ... By the Society for enabling the society to make grants thereout in any cases which the Council think suitable for such treatment and in their absolute discretion decide so to treat, for the purpose of relieving or mitigating losses sustained by any person in consequence of dishonesty on the part of any solicitor ..."
[6] The Legal Aid and Solicitors (Scotland) Bill was enacted in 1949; it created the Law Society of Scotland and introduced legal aid and advice. It also established the Scottish Solicitors Guarantee Scheme. When debated in Parliament, it was stated that the Bill inter alia provided "for the establishment of a guarantee fund to compensate persons who may suffer loss by reason of the dishonesty of a solicitor to whom money has been entrusted" (Hansard, Business of the House 16/12/48 columns 1402-3). Before the House of Commons Standing Committee on 5/4/49, the Lord Advocate of the day stated that the provisions were
"to cover one of the great injustices that has sometimes occurred in legal circles, where unfortunately a solicitor may have gone off the rails; he may have embezzled money belonging to a client, and the client has unfortunately had to go without any proper compensation because the solicitor's estate has not been sufficient to provide proper compensation.
In assessing what the compensation should be, provision is made in this Clause that the compensation should be the compensation which, in the opinion of the Council of the Law Society, will be appropriate. It may be total compensation, or it may be partial compensation, because subsection (3) makes provision for the limiting of the compensation if there has been negligence on the part of the client. We feel that it has to be left very largely on a discretionary basis, having regard to the merits of each case." (column 367)
[7] When the Bill was considered in the House of Lords for its Second Reading on 17 July 1949, the Parliamentary Secretary, Ministry of Works (Lord Morrison) stated inter alia that
"... Clause 22 ... provides for the establishment of a Guarantee Fund to compensate persons who may suffer loss by reason of dishonesty on the part of any solicitor or a servant of his. A similar Guarantee Fund already exists in England, and the establishment of such a fund in Scotland, which has been voluntarily proposed by the profession, will be welcomed by the public ..." (column 985)
[8] Section 22 of the 1949 Act provided inter alia that
"(2) ... the Guarantee Fund shall be held by the society for the purposes of making grants in order to compensate persons who in the opinion of the Council ... suffer pecuniary loss by reason of dishonesty on the part of any solicitor ...
(3) ... The Council may refuse to make a grant or may make a grant only to a limited extent if they are of the opinion that there has been negligence on the part of the applicant or of any person for whom he is responsible which has contributed to the loss in question ..."
[9] The relevant provisions of the English 1941 Act were substantially re-enacted in section 32 of the Solicitors Act 1957. By subsection (2) it was provided that if loss sustained in consequence of the dishonesty on the part of a solicitor is proved "to the satisfaction of the Council" a grant may be made "if the Council thinks fit". This provision was in turn substantially re-enacted by section 36 of the Solicitors Act 1974 which omitted the phrase "if the Council thinks fit" and simply stated that the Society "may make a grant" of the purpose of relieving such loss.
[10] The current Scottish statutory provisions are in section 43 of the Solicitors (Scotland) Act 1980, which provides inter alia as follows:-
"Protection of clients
Guarantee Fund
43. - (1) There shall be a fund to be called "The Scottish Solicitors Guarantee Fund" (in this Act referred to as "the Guarantee Fund"), which shall be vested in the Society and shall be under the control and management of the Council.
(2) Subject to the provisions of this section and of Schedule 3 the Guarantee Fund shall be held by the Society for the purpose of making grants in order to compensate persons who in the opinion of the Council suffer pecuniary loss by reason of dishonesty on the part of
(a) any solicitor, registered foreign lawyer or registered European lawyer in practice in the United Kingdom, or any employee of such solicitor, registered foreign lawyer or registered European lawyer in connection with the practice of the solicitor, registered foreign lawyer or registered European lawyer, whether or not he had a practising certificate in force when the act of dishonesty was committed, and notwithstanding that subsequent to the commission of that act he may have died or had his name removed from or struck off the roll or may have ceased to practise or been suspended from practice; or
(b) any incorporated practice or any director, manager, secretary or other employee of an incorporated practice, notwithstanding that subsequent to the commission of that act it may have ceased to be recognised under section 34(1A) or have been wound up.
(3) No grant may be made under this section -
(a) in respect of a loss made good otherwise;
(b) in respect of a loss which in the opinion f the Council has arisen while the solicitor was suspended from practice;
(c) to a solicitor or his representatives in respect of a loss suffered by him or them in connection with his practice as a solicitor by reason of dishonesty on the part of a partner or employee of his;
(cc) to an incorporated practice or any director or member thereof in respect of a loss suffered by it or him by reason of dishonesty on the part of any director, manager, secretary or other employee of the incorporated practice in connection with the practice;
(d) unless an application for a grant is made to the Society in such manner, and with such period after the date on which the loss first came to the knowledge of the applicant, as may be prescribed by rules made under Schedule 3;
(e) in respect of any default of a registered European lawyer, or any of his employees or partners, where such act or default takes place outside Scotland, unless the Council is satisfied that the act or default is closely connected with the registered European lawyer's practice in Scotland;
(f) in respect of any act or default of a registered foreign lawyer, or any of his employees or partners, where such act or default takes place outside Scotland, unless the Council is satisfied that the act or default is closely connected with the registered foreign lawyer's practice, or any of his partners' practice, in Scotland; or
(g) in respect of any act or default of any member, director, manager, secretary or other employee of an incorporated practice which is a multi-national practice, where such act or default takes place outside Scotland, unless the Council is satisfied that the act or default is closely connected with the...
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